Cold War Hawks and the Soviet Economy

Yesterday, I wrote that Cold War hawks had overestimated the resiliency of the Soviet economy. David Frum says I have this backwards, and hawks argued that the CIA’s official estimate of the size of the Soviet economy was too big, and that therefore military spending accounted for a larger share of GDP than the CIA thought. They drew various strategic inferences from this.

Given the nature of the assignment, the report actually dedicates almost shockingly little time to assessing the state of the Soviet economy. The way it does come up is that Team B’s main conclusion is that the USSR is seeking not rough military parity with the USA, but such clear superiority that they would be able to initiate and win a war with the United States. One obvious rebuttal to that would be that it would be impossible for a country as economically weak as the USSR to achieve that kind of military superiority. Team B says this is wrong and reach the following conclusion on page 23 (emphasis in the original):

The primacy of the military priority in Soviet resource allocation decisions has long been strongly indicated by the magnitude of Soviet military programs and forces. This evidence is now reinforced by evidence of much higher military budgets than previously estimated. While Soviet military claimants for resources may compete with one another for resources, they face no serious competition from claimants in the civilian economy sector—nor is this surprising. Within what is, after all, a large and expanding GNP, the Soviets have made it absolutely clear that defense requirements have an almost absolute first call on available resources. Denial of consumer needs is not a new or inconsistent pattern of Soviet behavior—exactly the contrary is the case. Therefore, Soviet strategic forces have yet to reflect any constraining effect of civil economy competition and are unlikely to do so in the foreseeable future.

The idea that Soviet resource allocation was completely unconstrained by domestic political concerns is I think just mistaken. But this is largely a misconstruction of the whole issue. Whether or not the military has absolute priority in the allocation of resources, it’s still the case that Soviet military production can only overtake the United States if the economy grows and the presence or absence of growth thus operates as a constraint on Soviet military capabilities. It’s true that this report doesn’t explicitly state that it believes in bright growth prospects for the Soviet Union, merely referring to “a large and expanding GNP.” But given the Soviet economy’s smaller base, either Soviet GDP would grow faster than US GDP or else the absolute size of the GDP gap between the US and USSR would grow.

Incidentally, the whole report is full of amusing accusations that the CIA has erred in its analysis of the Soviets by engaging in “mirror-imaging”—basically assuming that the Soviet state is prudent and risk-averse—by not recognizing the Russians’ inherent and insatiable thirst for conquest. This leads them to the claim that “The expansion of Russia as a continental empire is without parallel in world history: no country has grown so fast and none has held on so tenaciously to its conquest.” The parallel to Russia’s continental expansion would, of course, be the United States of America which I believe is an observation people were making as far back as de Tocqueville.